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What is MDEF™ Investing? Strategy before tactics. Strategic investments dictate tactical actions in the Metals, Defense, Energy & Food sectors.

- Jeffrey C. Borneman

Energy Spike From Anit-Russian Sanctions Imminent?

Jeffrey C. Borneman | September 21, 2014

"The anti-Russian sanctions threaten the security of the global energy market (emphasis mine), said former CEO of British Petroleum Tony Hayward. "The restrictions on Russian oil and gas companies may lead to disruptions in supplies and rising oil prices."

Hayward also said it remains unclear where new supplies will be sourced when oil exports from the United States reach their maximum, adding " ... the world is experiencing a false sense of security in connection with the shale gas revolution in the United States (emphasis mine) that has led to an increase in oil production in the United States by 60 percent since 2008," (Financial Times).

The danger of a spike (or long term price hike) in the global Energy market is a clear economic threat to dozens of countries currently in recession or even in true depression. Further, removing Russian supply from the established supply chain would likely lead to more than simple disruptions and rising prices. In all likelihood it would mean War.

Individuals who understand that a comprehensive view of world events is critical to the security of their investments should note that Hayward's statements were made in an interview with the Financial Times and reported in Pravda and Russia Today (full article attached) yet were not covered by any US media.

Hayward also made the comment that: " ... (the) shale boom in the United States that concealed the growing risks (emphasis mine) to the global energy market would soon subside, and the economy of the whole world would be defenseless to possible restrictions in oil supplies."

Investors who assume that the trajectory of falling Energy prices will continue based on the reality of slowing economies are frankly, dead wrong. As discussed here Russia relies on Energy exports for 52% of its budget and the sanctions are harming Russia's economy much more than generally reported. The obvious next move for Russia is to wait for its most opportune moment to slow or shut the Energy flow to Europe and the Baltic's, causing maximum pain for and Energy hungry Europe and providing the richest reward to the Russian treasury - most likely in the dead of this winter when the repercussions will be immediate and severe.

The Russian sanctions are setting the stage for another European War and investors should understand this and prepare now. What other market sectors must rise in the event of War? If you want to know more about how the MDEF™ Investing strategy is positioned in this, or other geopolitical possibilities, please contact us directly.

The comments were made against the backdrop of Western sanctions that affected Gazprom, Lukoil and several other Russian energy companies, against which the United States and the EU imposed restrictions for the supply of goods, technologies and services for exploration and extraction of deep shelf resources, as well as for the implementation of shale oil projects.

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